One question comes up in nearly every initial conversation with a prospective client: why does Godsey & Gibb charge an ongoing advisory fee? Many people considering our firm have spent years working with a broker or have handled their investments on their own and have never paid directly for investment advice. Given that broker or platform’s compensation may be built into the products they sell rather than billed separately, the idea of paying a visible, recurring percentage of assets can understandably feel new and uncomfortable.
What many may not know, however, is that an advisory fee schedule rarely tells the whole story. What a client actually pays to have their wealth managed can include several additional layers of cost that never appear on the same page as the advisory fee, and some of those layers can outweigh the fee itself.
Below are three of the most common ones, how they show up in a client’s portfolio, and how Godsey & Gibb handles each.
Expense Ratios: A Fee Hiding Inside the Investment
Many advisory firms, including several of the lower-cost alternatives prospective clients bring up in conversation, build portfolios primarily out of mutual funds and ETFs rather than individual securities. Most all of those funds carries its own internal expense ratio, and that cost is deducted from fund assets automatically, well before performance ever reaches a client’s account summary. It sits quietly on top of any advisory fee that’s already being charged.
How large that layer gets depends on what the fund holds and how it’s managed. Per the Investment Company Institute’s 2025 data, the asset-weighted average expense ratio for actively managed equity mutual funds was 0.64%, more than twelve times higher than the 0.05% average for index equity funds. That gap only widens further out on the spectrum: the most expensive 10% of equity mutual funds charged 1.84% or more in 2025, and sector-specific funds averaged 1.15% on a simple-average basis.
Once you add the two fees together, you learn an advisor charging a 0.75% to 1.00% fee who builds a portfolio around actively managed funds can leave a client paying an all-in cost north of 1.4%. Whether a client ends up in that position depends on decisions made inside the account that are rarely broken out line by line, which is exactly why most people never think to ask about their true, all-in cost.
Godsey & Gibb removes this layer for the large majority of client portfolios by selecting individual stocks and bonds directly rather than assembling a portfolio out of packaged funds. There’s no expense ratio sitting on top of the advisory fee. Funds still have a place in select circumstances, most often for smaller accounts, when that structure genuinely serves the client better.
Tax Drag: Paying for Decisions You Didn’t Make
At year-end, mutual funds pass along any capital gains the fund realized over the course of the year to every shareholder of record, regardless of whether an individual investor bought, sold, or held steady the entire time. Those gains are the byproduct of the fund manager’s trading decisions, not the client’s own choices, yet they still create a taxable event in a client’s account. For a retiree who is managing taxable income deliberately, a surprise capital gains distribution, particularly one that arrives in a year the fund itself lost value, can turn tax season into an unwelcome surprise.
Owning individual securities eliminates that unpredictability. Because Godsey & Gibb selects and manages individual stocks and bonds directly, every decision about when to realize a gain is made in-house, with full visibility into the client’s tax situation, rather than by a fund company’s trading desk operating without any knowledge of that client’s circumstances. Our in-house portfolio management team and the client’s advisor coordinate on the timing of every realized gain before it happens, precisely to avoid the kind of tax-season surprise that comes standard with fund ownership.
Cash Drag: What Your Idle Cash Is Actually Earning
Every portfolio tends to hold some amount of cash at any given time, whether it’s a dividend waiting to be reinvested or funds set aside deliberately for near-term spending. What happens to that cash while it sits idle differs significantly from firm to firm, and most firms don’t spell it out clearly.
In 2022, the SEC reached a $187 million settlement with subsidiaries of a major discount brokerage over how its robo-advisor platform handled client cash. The platform was marketed as having no hidden fees, while the firm simultaneously swept client cash into an affiliated bank, lent it out, and pocketed the difference between what it earned on those loans and the far smaller amount it credited back to clients. Regulators have since examined similar cash sweep practices at other large institutions as well.
Godsey & Gibb takes a different approach. Client cash is held in federal money market funds, and the yield those funds earn goes to the client, not the firm or an affiliated bank. There’s no sweep arrangement quietly capturing a spread on cash that’s simply waiting to be put back to work.
Ask Before You Compare Price Tags
None of this means every lower-fee advisor is stacking hidden costs onto a client’s portfolio, or that paying 1% annually automatically makes a firm the worse deal. It means the number printed on a fee schedule is where the conversation should start, not where it should end. Before comparing advisors on price alone, it’s worth asking each firm a few direct questions. What investment vehicles do they use, and what do those vehicles cost on top of the advisory fee? Who decides when to realize a capital gain in a client’s account, and how is that decision made? Where does uninvested cash sit, and who benefits from the yield it generates?
At Godsey & Gibb, those questions have straightforward answers: one advisory fee, no additional fund expenses layered on top for the vast majority of accounts, deliberate and coordinated timing on every realized gain, and cash that earns its own yield for the client rather than for the firm. We’d encourage anyone evaluating an advisor, including us, to put these same questions to every firm on their list. Understanding the full cost of a relationship, not just the number on the fee schedule, is what leads to a decision worth sticking with.
Sources: Investment Company Institute, “Trends in the Expenses and Fees of Funds, 2025,” ICI Research Perspective 32, no. 1 (March 2026). U.S. Securities and Exchange Commission, Press Release 2022-104, June 13, 2022.